NOTE 10 — INCOME TAXES

As of March 31, 2017, Tellurian Investments had net operating loss (“NOL”) carry forwards for both financial reporting purposes and for federal, state and international income tax reporting purposes. The Company has established a full valuation allowance against its NOLs and has not recorded a net liability for federal, state and international income taxes in any of the periods included in the accompanying financial statements. Our Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2017, and 2016 include no income tax benefits.

Prior to the Merger, Magellan had fully-valued deferred tax assets of $45.9 million related to NOL carry forwards available to reduce U.S. federal taxable income in future tax years. The Merger may have resulted in an ownership change under Section 382 of the Internal Revenue Code (the “Code”), potentially limiting our ability to use Magellan’s NOL carry forwards in future taxable years for U.S. federal income tax purposes.

These limitations may affect the timing of when these NOL carryforwards can be used which, in turn, may impact the timing of when cash is used to pay the taxes of Tellurian. In addition, Tellurian’s ability to use Magellan’s NOL carry forwards will be dependent on Tellurian’s ability to generate taxable income. Some portion of the NOL carryforwards could expire before Tellurian generates sufficient taxable income. Tellurian has not yet determined the resulting limitation that may impact utilization of Magellan’s NOL carry forwards against future periods.

Magellan was historically subject to tax in the U.S. and various state and foreign jurisdictions. Following the Merger, the Company remains subject to periodic audits and reviews by taxing authorities; however, we do not expect that these audits will have a material effect on the Company’s tax provision. Magellan’s federal tax returns for the years after June 30, 2013 remain open for examination. Tax authorities may have the ability to review and adjust net operating loss or tax credit carryforwards that were generated prior to these periods if utilized in an open tax year.